What are Bull and Bear Flag patterns?

Bull and bear flag formations are price patterns which occur frequently across varying time frames in financial markets. These patterns are considered continuation patterns in technical analysis terms, as they have a habit of occurring before the trend which preceded their formation is continued.

What is Bear Flag?

The bear flag is an upside-down version of the bull flag . It has the same structure as the bull flag but inverted. looks like sketch 3 As can be seen above, the flagpole forms from an ALMOST VERTICAL price drop, which is followed by a period of consolidation, with parallel upper and lower trendlines forming the flag.

What is a bull flag & how does it work?

Upper and lower trendlines are plotted to reflect the parallel diagonal nature. The breakout forms when the upper resistance trend line breaks again as prices surge back towards the high of the formation and explodes through to trigger another breakout and uptrend move. The sharper the spike on the flagpole, the more powerful the bull flag can be.

How do bear flag patterns work?

Bear flag patterns work in the same way as bull flag patterns, just in reverse. Every good bear flag pattern trade should be made up of three elements: Stop Loss: Most traders use the opposite side of the flag pattern as a stop-loss to protect themselves against the price moving in the other direction.